A settlement fail occurs when either the securities or cash are not delivered by the required settlement date (after T+2). Fails can result from various operational, technical, or funding issues and require specific resolution procedures while potentially incurring penalties and regulatory reporting requirements.

Fail Categories

Type	Description	Primary Cause
Securities Fail	Unable to deliver securities	Position shortage
Cash Fail	Unable to deliver payment	Funding issues
Technical Fail	System/processing issues	Operational problems
Administrative Fail	Documentation/instruction issues	Processing errors

Impact Assessment

Impact Area	Effect	Consequence
Regulatory	Reporting requirement	Compliance action
Financial	Fail charges/penalties	Cost impact
Operational	Additional processing	Resource drain
Relationship	Client/counterparty impact	Reputation risk

Resolution Process

Stage	Action	Timeline
Identification	Fail recognition	Immediate
Investigation	Root cause analysis	Day of fail
Communication	Stakeholder notification	Same day
Resolution	Corrective action	ASAP
Documentation	Record keeping	Throughout

Risk Management

Risk Type	Description	Mitigation
Financial Risk	Penalty exposure	Early resolution
Regulatory Risk	Compliance issues	Proper reporting
Operational Risk	Processing impact	Process improvement
Reputational Risk	Client relationship	Communication plan

Best Practices

1. Fail Prevention:

• Early monitoring
• Proactive management
• Position verification
• Funding confirmation

2. Resolution Management:

• Quick identification
• Root cause analysis
• Prompt communication
• Effective resolution

3. Documentation:

• Complete records
• Resolution tracking
• Cost recording
• Report filing

Regulatory Requirements

Requirement	Timing	Action
Fail Reporting	Daily	Submit reports
Resolution Updates	Ongoing	Status updates
Cost Recording	Per incident	Fee calculation
Documentation	Throughout	Record keeping

Cost Implications

Cost Type	Description	Impact
Fail Charges	Regulatory penalties	Direct cost
Interest Claims	Funding costs	Financial impact
Operational Costs	Additional processing	Resource cost
Buy-in Costs	Forced purchase	Market impact

Communication Protocol

Stakeholder	Timing	Method
Counterparty	Immediate	Direct contact
Regulators	As required	Official reporting
Internal Teams	Same day	Status updates
Management	Daily	Summary reports

Resolution Strategies

1. Securities Fails:

• Borrowing arrangements
• Alternative delivery
• Buy-in procedures
• Position reconciliation

2. Cash Fails:

• Funding solutions
• Payment prioritization
• Credit arrangements
• Treasury management

3. Technical Fails:

• System fixes
• Process corrections
• Instruction updates
• Documentation review

Performance Metrics

Metric	Description	Target
Resolution Time	Time to resolve	Same day
Cost Impact	Financial effect	Minimize
Recurrence Rate	Repeat fails	Zero
Reporting Accuracy	Documentation quality	100%

Documentation Requirements

Document	Purpose	Timing
Fail Notice	Initial recording	Day of fail
Resolution Plan	Action steps	Same day
Status Updates	Progress tracking	Daily
Final Report	Resolution record	Upon completion

System Requirements

1. Monitoring Tools:

• Fail identification
• Status tracking
• Cost calculation
• Report generation

2. Communication Systems:

• Alert mechanisms
• Update distribution
• Status tracking
• Report filing

3. Resolution Tools:

• Action tracking
• Cost recording
• Documentation
• Reporting

Success Factors

1. Prevention:

• Early detection
• Proactive management
• Risk assessment
• Control enhancement

2. Resolution:

• Quick response
• Effective action
• Clear communication
• Complete documentation

3. Learning:

• Root cause analysis
• Process improvement
• Control enhancement
• Training updates

Market Impact

Area	Effect	Management
Liquidity	Market efficiency	Quick resolution
Confidence	Market stability	Effective handling
Relationships	Counterparty trust	Clear communication
Operations	Processing efficiency	Process improvement

Note: Fail management requirements can vary by market, instrument, and jurisdiction. Always verify specific requirements with relevant clearing organizations and regulators.